On a route with multiple airlines, the demand for tickets from a single airline on that route is typically:

On a route with multiple airlines, the demand for tickets from a single airline on that route is typically:

• A. elastic and more elastic than the demand for all tickets on that route.
• B. inelastic and less elastic than the demand for all tickets on that route.
• C. elastic but less elastic than the demand for all tickets on that route.
• D. inelastic but more elastic than the demand for all tickets on that route.

Answer: (A)

When there are close substitutes across sellers on a route, the demand for a single airline’s tickets tends to be more price-sensitive. Travelers can easily switch to other airlines on the same route if prices rise, schedules change, or service quality differs. That substitution opportunity makes the quantity demanded from that specific airline more elastic. At the same time, the overall demand for all tickets on the route aggregates across all airlines. While some travelers will switch between carriers, the total need to travel that route remains, so the route’s market demand is less responsive to the price change of any one airline. In other words, the elasticity for a single airline is high (elastic) and is greater than the elasticity of demand for all tickets on the route.

When there are close substitutes across sellers on a route, the demand for a single airline’s tickets tends to be more price-sensitive. Travelers can easily switch to other airlines on the same route if prices rise, schedules change, or service quality differs. That substitution opportunity makes the quantity demanded from that specific airline more elastic.

At the same time, the overall demand for all tickets on the route aggregates across all airlines. While some travelers will switch between carriers, the total need to travel that route remains, so the route’s market demand is less responsive to the price change of any one airline. In other words, the elasticity for a single airline is high (elastic) and is greater than the elasticity of demand for all tickets on the route.